David Dunigan, president of Modern Store Equipment stands inside one of his walk-in coolers under construction within a liquor store in Florence. – AARON HOUSTON

Creating liquor store interiors, from the checkout counter to the walk-in refrigerator, has long been the recession-resisting strategy at Modern Store Equipment. President David Dunigan said the company his father Thomas founded in 1958 has averaged an annual 30 percent growth for the past few years, reaching $10 million in revenue for 2012.

Modern Store Equipment recently moved its computerized woodworking shop and most of its 35 employees to a new location in Florence, having outgrown the former Bordentown headquarters, which is now a warehouse.

The economy may have tanked in the last recession, but that didn't stop people from buying beer and wine. And the commercial lending squeeze didn't cause credit to dry up for liquor retailers, which are mostly small businesses, Dunigan said. Liquor licenses are valuable and "our customers tend to be relatively easy to finance" because they typically invest a fair amount of their own cash into the store.

Depending on a store's size, retailers pay the company from $50,000 to $500,000 to design, build and install the interior. Modern Store Equipment manufactures about a third of what it sells —including counters, climate controlled fine-wine cases, and a specially designed wine-racking system — then outsources everything else the store requires, from shelves to shopping carts. A team goes to the store site and puts it all together in a week or two; Modern Store Equipment creates about 30 stores a year.

In 1991, Total Wine and More hired the company to build its first store, and now the chain has 88 stores in 12 states, including four in New Jersey, all built by Modern Store Equipment. Paul Piho, vice president of Total Wine's new stores group, said, "They are willing to work with us and really adapt to what we need; it is a really good partnership." He said Modern Store Equipment offers a turn-key solution: "They put everything in, right up until you open the door: the refrigeration, the mill work, cash register stands, climate-controlled boxes for fine wines, humidors for cigars."

Piho said his company expects to open 10 to 12 new stores a year in the next few years, and plans to continue working with Modern Store Equipment: "We have been very pleased with their ability to do the store fixture set-up on schedule and get us open."

About five years ago, Dunigan began investing in computer-controlled woodworking machines "and that has really changed the game. You have to be totally computerized if you want to compete anymore." High-tech manufacturing "takes advantage of our educated workforce. You can afford to pay people more when each person is producing a lot more volume per machine, and that is what our machines allow us to do."

This fall, Dunigan upgraded his computerized panel saw, replacing one that cut two boards at a time with a new one that can handle a three-board stack. "It cuts at twice the speed, so we have more than doubled our capacity," he said. "Now instead of everybody waiting for the saw, we have to control the saw so it doesn't overwhelm the other end of the factory."

Current low interest rates help the company by making it easier for his clients to borrow money to finance a new liquor store. When the prime rate soared during the 1980s "We were doing anything we could do to stay in business — doing people's kitchens and whatever work we could find. That was the toughest time for us," Dunigan said. The company often works with Asian Indian entrepreneurs, where a group of engineers or doctors join together to invest in a store: "It's a very self-supporting community," he said.

Another source of new stores: "People coming out of corporate America whose jobs have been downsized or disappeared, and now they are going to open that small business they always wanted." Entrepreneurs buy small stores then expand into larger spaces that need a completely new interior.

Dunigan figures the slump in real estate prices during the last recession enabled him to occupy his new office and factory space in Florence for about half of what it would have cost him during the real estate boom. He purchased his 24,000-square-foot building and did renovations that included rooftop solar panels, for a total project cost of about $1.5 million, financed with a Small Business Administration loan from First Choice Bank and the Regional Business Assistance Corp.

Al Titone, SBA New Jersey district director, said Dunigan got an SBA 504 loan, which provides long-term financing of 90 percent of the project costs for capital assets like real estate and equipment, with the company putting up 10 percent. Titone said the 504 program enables business owners "to make the investment in their own facilities and continue to expand and create jobs. The community gets the benefit of additional jobs, business growth and tax revenues from a growing small business."

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Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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